A business law blog published by the business lawyers at AttorneyBritt - Gary L. Britt, CPA, J.D. Commentary and information regarding the laws and regulations applicable to individuals, corporations, partnerships, and limited liability companies (LLCs); as they relate to the myriad of business transactions, contracts, and agreements every business owner, shareholder, member, physician, and/or health care provider must consider.

Monday, March 23, 2015

Five Key Points About Children With Investment Income

Special tax rules may apply to some children who receive investment
income. The rules may affect the amount of tax and how to report the
income.

Here are five key points to keep in mind if your child has
investment income:

1. Investment Income.
Investment income generally includes interest, dividends and capital
gains. It also includes other unearned income, such as from a trust.

2. Parent’s Tax Rate.
If your child's total investment income is more than $2,000 then your
tax rate may apply to part of that income instead of your child's tax
rate. See the instructions for Form 8615, Tax for Certain Children Who Have Unearned Income.

3. Parent’s Return. You
may be able to include your child’s investment income on your tax
return if it was less than $10,000 for the year. If you make this
choice, then your child will not have to file his or her own return. See
Form 8814, Parents' Election to Report Child's Interest and Dividends, for more.

4. Child’s Return. If your child’s investment income was $10,000 or more in 2014 then the child must file their own return. File Form 8615 with the child’s federal tax return.

5. Net Investment Income Tax. Your child may be subject to the Net Investment Income Tax if they must file Form 8615. Use Form 8960, Net Investment Income Tax, to figure this tax. For more on this topic, visit IRS.gov.

Refer to IRS Publication 929, Tax Rules for Children and Dependents, for complete details on this topic. Visit IRS.gov/forms to view, download or print IRS forms and publications anytime.